KUALA LUMPUR: Malaysia needs to invest more in human capital development to address income imbalances in the country.
The income gap between households, which has widened over the years, can best be countered through human capital and quality education, not physical wealth.
"Based on the latest World Bank report, this (imbalance) is caused by human capital. Different countries have different levels of imbalance in human capital rather than natural resource capital,” said Allen Ng, lead author of “The State of Households 2018: Different Realities” report.
The report, published by the Khazanah Research Institute (KRI), was launched here today by Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan.
"If we do not solve the problem of human capital by investing in education and healthcare, it will worsen future imbalances," Ng told a news conference after the report launch.
For example, Malaysians take 12 years to get an education which is the equivalent of nine years in Singapore. Hence, there is an additional three years of educational quality adjustment between the two countries, he said.
Ng acknowledged that in general, income imbalances in Malaysia had seen progress with the Gini coefficient — a measure of income imbalance in the country — decreasing from 0.513 in 1970 to 0.399 in 2016.
However, the income gap between the top 20 per cent income (T20) and the bottom and middle 40 per cent (B40/M40) household groups continued to widen, according to the KRI report.
Meanwhile, KRI executive committee chairman Datuk Hisham Hamdan said it was suggested that different policies be implemented — instead of using a single policy — to solve the imbalances in household income or the construction of affordable housing nationwide.
He said based on the KRI study, every state and their respective households had their own unique issues and challenges. Therefore, policies should be in line with the context of each state and their respective household groups.